ADB lends $350m for India road upgrades

The Asian Development Bank has agreed a $350m loan to Madhya Pradesh to enhance connectivity across India's second-largest state. 

As part of plans to enhance connectivity through its Delhi Mumbai Industrial Corridor, the government of the Indian state of Madhya Pradesh has taken out a $350 million loan from the Asian Development Bank to finance 1,600 kilometres (km) of district road upgrades.

The project will focus on lane widening, surface improvements and strengthening of culverts and bridges. It will aim at enhancing traffic flow, road safety and connectivity of poorer areas to the state’s economic centers.

“Madhya Pradesh, India’s second-largest state, has widely scattered industrial and growth centers and agricultural production areas […]. The loan, which is ADB’s first in the district roads sector in India, will address a neglected part of ongoing road network upgrades, with these secondary roads providing a key link between rural roads and state highways,” said Ravi Peri, ADB’s principal transport specialist for South Asia.

Five-year performance-based maintenance arrangements will be included as an adjunct to the construction contracts to help guarantee good construction standards. India developers typically build roads and maintain them for a fixed term of one raining season or one year, Peri explained during an interview with Infrastructure Investor. They then tend to transfer liabilities back to the state, which the ADB officer said usually leads to poor quality construction.

The works and bidding processes will be overseen by the Public Wealth Department and state-owned entity Madhya Pradesh Road Development Corporation (MPRDC), operating under build-transfer-operate (BOT) public-private partnership (PPP) schemes.

The ADB loan and the state government are to cover respectively 70 percent and 30 percent of the project's total cost of $500 million. The project is to be completed by April 2018.

Rural roads represent 72 percent of Madhya Pradesh's 127,000km network. With vehicle use increasing 10 percent a year over the last decade, ADB forecasts the state's investment gap in the state road sector to reach $1.2 billion between 2013 and 2023.